Despite the importance of having savings in your pocket, thousands of Brits are missing out on huge profits by choosing a savings account with a low interest rate.
By falling victim to this habit, savings account holders around the UK are failing to make the most of excellent interest rates that could bring in some extra cash.
In fact, swapping your savings account could earn you up to 70 times the interest! Here’s how to avoid getting stuck with a low-interest savings account.
40% of Brits are missing out on higher rates!
A recent survey by Hargreaves Lansdown revealed that around 40% of savings account holders could be missing out on high interest rates. This is because they make the easy mistake of opening a savings account with the same bank as their current account.
The survey also showed that 24% of account holders have an account with a building society and only 11% hold a savings account with a newer online company.
By doing this, account holders could be missing out on higher interest rates that are often offered by newer companies. A massive 57% of people admitted to not shopping around when choosing their savings account, which could explain why so many savers are in the dark about higher rates.
The typical high street bank will offer a very low 0.01% interest rate. As a result, many savings accounts fail to make any significant gains. In contrast, some online savings accounts are offering interest rates of more than 1%. Therefore, swapping to an online account could earn you up to 100 times the interest!
Why do people settle for low rates?
If savings are so important, why do so many people stick with low interest rates?
According to Sarah Coles from Hargreaves Lansdown, “You’re a captive audience for your bank, and anyone who has ever stopped at a motorway service station knows that being at the mercy of a single provider is a terrible place to be. Our loyalty to our bank means we’re accepting miserable savings rates, when we could get over 70 times the interest by considering the alternatives.”
Many of these alternatives offering higher interest rates are new online companies. Unsurprisingly, the majority of online savings account holders belong to the younger age groups (24-35), who seem to have more trust in these modern accounts than their older counterparts.
In the survey, 23% of savers said that trust was the most important consideration when choosing a savings account provider. As a result, many people stay away from lesser-known online accounts and find traditional, big-name banks more appealing.
Another reason that savers get stuck with low-interest accounts is convenience. For a large number of people, opening a savings account with the same bank as their current account provider simply seems easier than shopping around for a new company.
However, is your current account provider really more convenient than an online account? For the most part, the answer is no. This is due to the fact that online savings accounts make it easier than ever to transfer money and see all of your savings in one place.
Savings accounts that could significantly boost your interest rate
Traditional bank savings accounts have had a good run, but now might be the time to switch to a higher-interest online account! Here are some great savings account options that could help you earn 70 times the interest (or more).
|Bank name||Interest rate||Minimum deposit|
|United Trust Bank||1.37% (One-year fixed term)||£5,000|
|QIB (UK)||2.10% (Five-year fixed term)||£1,000|
|SmartSave||1.63% (Two-year fixed term)||£10,000|
|Investec||0.71% (easy access savings)||£5,000|
|Aldermore||0.75% (only two withdrawals per year)||£1,000|
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